JetBlue delays London launch

JetBlue still plans for London service, just not quite as soon as previously expected

JetBlue still intends to launch service to Europe. CEO Robin Hayes believes that “the need for us to enter that market and bring more competition” remains relevant. Just don’t expect it to happen quite so soon, and that may be a good thing.

We know we’re going to emerge as a smaller airline, but we still see that opportunity, albeit shifted back a little bit in time.

– JetBlue CEO Robin Hayes

Speaking on today’s Q1 earnings call CEO Robin Hayes notes that the carrier faces significant uncertainty and increased debt in the short term, with an obligation to play defense “over the next two to three years has to be to de-lever and repair our balance sheet.” But JetBlue also prides itself on being a more nimble operator than not, and there’s some “opportunity to play offense” as well. Taking all that into account Haves says, “Certainly you should expect a timing impact, we’re probably going a little later than we intended. But the market will recover at some point and the need for us to enter that market and bring more competition is still as relevant in the future as it was in the past. So expect a timing impact.”

Slots opportunity in London

The delay in launching the service could come with a side benefit for JetBlue: Access to Heathrow or Gatwick might be available without buying slots on the open market.

JetBlue spent the past two years lobbying regulators to convince them that the market demands greater competition, hoping to squeeze concessions out of a legacy airline as joint venture deals renewed. The company came up short with the Blue Skies alliance from Delta Air Lines, KLM, Air France, and Virgin Atlantic. But UK regulators have the American Airlines/IAG/Finnair deal under greater scrutiny. The Competition and Markets Authority (CMA) began review of that deal in October 2018 and indicated today that it “identified potential competition concerns on routes between London and each of Boston, Chicago, Dallas, Miami and Philadelphia.”

We therefore welcome the offer from BA and American Airlines to find a way of addressing the CMA’s concerns. Their suggested resolution has the potential to increase competition and deliver lower fares for customers, while also preserving the benefits that joint airline agreements offer passengers. We are acting now as the current commitments expire this year, but can review the agreement in the future if the market does not return to its pre-COVID state.

– Ann Pope, Senior Director, Antitrust at the CMA

In response to the CMA’s objections American Airlines and British Airways proposed a package of concessions, including:

Releasing additional take-off and landing slots at London Heathrow or Gatwick airports to enable competitors to begin or increase non-stop flights between London and Boston, Dallas and Miami.

Measures to support competing services on these routes as well as on the London to Chicago and London to Philadelphia routes, including access to connecting passengers on preferential terms.

For JetBlue the opportunity to use these slots for its proposed Boston-London service would be a huge win. Hayes describes the company as “encouraged” by the potential for slots ceded from the legacy carriers. And the timing of that slot transfer could work in JetBlue’s favor as it awaits the market recovery to launch its service. Typically slots must be used 80% of the season or the are returned to the assigning authority. With transfers like this, however, the acquiring airline typically receives an extra year of dormancy allowed before enforcement begins.

And even if the relief slot from AA/BA doesn’t pan out, there’s always the chance of securing one from Virgin Atlantic. The carrier announced this week it was closing its Gatwick operations, though it hopes to hold the slots. By Summer 2021 it will likely be forced to use, barter or return them. Norwegian’s future at Gatwick is also uncertain as the carrier does not expect long-haul operations to resume until 2021 at the earliest.

Fleet adjustments support the delays

At the end of 2019 JetBlue expected to take delivery of 14 A321neo aircraft in 2020 and a further 17 A321neo aircraft in 2021, of which 13 would be the A321LR model that it will fly across the Atlantic. Today the carrier revised its fleet plans with expectations of only 7 delivered this year (3 deliveries already complete, 4 expected in the back half of the years) and 10 for 2021, of which 5 would the the A321LR model. While the airline would still be able to launch its desired London frequencies with that smaller fleet it likely makes more sense to wait until at least 2022 when the A321LR fleet grows a bit more.

A320 restyling delayed anew

The carrier also indicated that it has now halted its A320 retrofit work as part of its cash conservation efforts. That program has been beset by troubles from nearly every angle and, while unfortunate, this delay has less impact on passengers as the planes are mostly grounded anyways. More than half the A320s received the new cabin so far.

With 170 aircraft currently grounded JetBlue has an opportunity to be selective about which frames return to service and notes that keeping capital expenses low during that process will be key. But it also should have sufficient time that any non-refreshed aircraft could be fitted before they return to service, assuming that consistent experience is still part of the company’s goals.

About Seth Miller

Seth Miller has over a decade of experience covering the airline industry. With a strong focus on passenger experience, Seth also has deep knowledge of inflight connectivity and loyalty programs. He is widely respected as an unbiased commentator on the aviation industry.

He is frequently consulted on innovations in passenger experience by airlines and technology providers.

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Comments

It’s funny how Jetblue thinks that it’s good that they want “competition” on routes where they don’t operate, but it’s bad when AA and DL want to give Jetblue competition.
Anyhow I think Jetblue needs to work on staying in business rather than flying to London. But if they want to fly to LGW that airport is empty so they can go and fly there today.

Thanks to regulatory relief the slots at Gatwick are not widely available today. The company would still have to negotiate to acquire them from an existing operator. And it is not in a compelling position to pay for them (or anything else) right now.